Sept. 2 (Bloomberg) -- Brazil's next soybean harvest may be 1.6 percent less than forecast as farmers reduce the area of crops they intend to grow, a U.S. agricultural attache said.

Production in the world's second-biggest soybean-growing country may reach 61 million metric tons in the year beginning next February, the U.S. government's Foreign Agricultural Service in Brasilia said in an Aug. 30 report released yesterday. That compares with the U.S. Department of Agriculture's official forecast for 62 million tons.

The area planted to soybeans may drop 3.9 percent next year after rising costs last season eroded profit. The strengthening Brazilian real, the world's best-performer this year among currencies tracked by Bloomberg, has increased the cost of imported fertilizers and chemicals needed to grow the crop.

``Most producers purchased imported inputs for planting last year's summer crop at an exchange rate of 3 real per dollar, but sold the crop at around the current rate of 2.30 real per dollar,'' agricultural attache Oliver Flake said in the report. ``At the current rate, dollar returns on soybean are said to be very discouraging to producers.''

The real has gained 20 percent the past 12 months and today traded at 2.34 real per dollar at 12:45 a.m. NYT.

Soybeans for delivery in November rose $4.25, or 0.7 percent, to $6.1125 a bushel in after-hours, electronic trading on the Chicago Board of Trade at 1:04 p.m. Singapore time. The futures have gained 12 percent this year.

Rising Costs

In Primavera do Leste area of Mato Grosso state, the cost of producing a sack of soybeans was 26 real, while farmers sold sacks of beans for 22 real, Flake said.

He expects the area of soybeans grown in the coming year to fall to 21.9 million hectares (54.1 million acres) from 22.8 million last season.

``Evidence of the reduction in planted area can be seen in lower fertilizer and seed sales to date compared to last year,'' he said. ``The National Fertilizer Association forecasts at least a 5 to 10 percent fall in fertilizer use from last year.''

Brazil's South faced the worst drought in 40 years in the past crop, which led the country to cut its soybean crop estimate by 17 percent to 50.23 million tons. The government already expects drought in the region during this crop year, said Silvio Isopo Porto, director of logistics at the Brazil's government statistics agency.

``We see the forecast of 61 million tons as very optimistic,'' Porto said. ``We can reach it if the weather is favorable, but there's a chance of drought and that's what farmers are mostly concerned about now.''

Soybean growers start planting on Sept. 15.

Porto said production costs are falling as lower purchases of fertilizers led industries to cut prices by 5 percent this year. Lower prices, together with a stronger currency, may help compensate the loss and encourage farmers to invest more in the next crop, Porto said.

Brazil's soybean exports are forecast to climb to 24 million tons in the year starting Feb. 1, 23 percent more than the 19.5 million tons estimated for the current year.

Only the U.S. grows and exports more soybeans than Brazil.

To contact the reporter on this story: Jason Gale in Singapore at j.gale@bloomberg.net.

Last Updated: September 2, 2005 12:53 EDT